Legal Responsibilities:
A Guide for NSPE and State
Society Officers and Directors
Prepared by:
Arthur E. Schwartz, CAE
NSPE Deputy Executive Director & General Counsel
January 2005
NSPE Winter Meeting
San Diego, California
Board Responsibilities

Operates at a policy (governance)
versus operational (management) level
by establishing policies that guide the
association to run:
– Effectively
– Legally
– Ethically
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Schlegel & Associates
Board Responsibilities



Ensures development of a multiple-year
strategic plan that is updated annually.
Links meeting agendas and decisions
directly to the strategic plan.
Ensures that all components of the
association are charged appropriately
and are working in alignment toward
implementation of the strategic plan.
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Schlegel & Associates
Board Responsibilities

Ensures the financial integrity of the
association
– Setting financial policies tied to
programmatic goals
– Developing and approving an annual budget
linked to the strategic plan
– Monitoring financial outcomes and
performance
– Viewing finances and resource development
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Board Responsibilities

Ensures that individual board members
participate responsibly by:
– Committing the necessary time and coming
to meetings well-prepared
– Doing appropriate board-level work
between meetings
– Keeping politics in perspective
– Supporting board decisions and association
policies to members and others.
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Schlegel & Associates
Board Responsibilities

Maintains a strong partnership with the
chief staff executive by:
– Setting guidelines for authority,
responsibility, and accountability
– Nurturing open, frequent, and honest
communication in both directions
– Providing a mutually supportive
environment
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Schlegel & Associates
Board Responsibilities

Evaluates each of these on an annual
basis:
– Association policies
– Financial performance
– The staff executive
– Board performance
– Performance of all components of the
organization
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Schlegel & Associates
Board Responsibilities

Legal Obligations
– Duty of care
– Duty of loyalty
– Duty of obedience
– Duty to avoid conflict of interest
– Duty to respect confidential information
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Duty of Care

Ordinary, reasonable care
– Honesty
– Acting in good faith
– Reasonable inquiry
– Exercising business judgment
– Reliance on experts
• Good faith reliance on attorneys, CPAs, etc.
• Worldcom, Enron boards teach lessons.
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Duty of Loyalty

Board members must:
– Remain faithful to the organization
– Act in best interests of entire organization,
not to a region, state, or practice area.
• Board members learn from constituency but
vote what’s best for whole association
– Make personal business, professional,
financial interests secondary to
organization.
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Duty of Obedience

Board members must act in accordance
with:
– Constitution
– Bylaws
– Policies and procedures
– Laws and regulations
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Duty: Avoid Conflict of Interest

Board members must:
– Disclose any apparent and real conflict of
interest.
– Recuse themselves from voting on issues
with conflict of interest or pledge to remain
objective or neutral.
– In some cases, resign from the Board to
avoid a very serious conflict. 
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Duty: Avoid Conflict of Interest

Board members must (cont.):
– Avoid expropriation of programs/activities of
the association.
– In all cases, come forward and disclose
conflict
• The Board can then decide appropriate action.

Conflict of interest standards can also
be enforced for committees, practice
divisions, etc.
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Duty of Confidentiality

Board members must keep confidential:
– Legal opinions
– Member information
– Disciplinary action
– Employment information
– Information marked as confidential
– Executive session
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Antitrust for Associations


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Associations bring competitors together,
making antitrust an issue.
Both federal and state law govern.
Sherman Antitrust Law very broad.
– Every combination, contract, or conspiracy
in restraint of trade or commerce is illegal.
– Penalties are high
• $10 million for corporations, associations
• $350,000 for individuals
• 3 years in prison
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Antitrust for NSPE and State
Societies

Potential liability:
– You
– Your company
– NSPE and State Societies

NSPE historical antitrust problem areas:
– Restrictions on advertising
– Restrictions on competitive bidding
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Antitrust for NSPE

What’s legal in seeking contracts:
– Individual engineers/firms can individually
refuse to bid.
– Clients are not required to seek bids.
– State and local qualifications-based
selection (QBS) laws are valid.
– NSPE, state societies can lobby for QBS
laws.
– State licensure board laws/rules are valid.
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Sexual Harassment


Sexual harassment is an important,
serious issue for associations and its
volunteers.
Moral imperative
– Obligation to members and employees to
be treated fairly and respectfully.

Financial imperative
– Liability for volunteers and NSPE; serious
threat of financial damages
– Reputation of Board, NSPE, State Societies
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Sexual Harassment


Difficult to always draw a bright line.
Two types of sexual harassment.
– Quid pro quo - Beneficial condition of
employment is premised on employee’s
submission to sexual advances.
– Hostile work environment - An environment
is so pervasively hostile that it materially
alters the terms/conditions of employment.
• Much more common than quid pro quo.
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Sexual Harassment

Examples of hostile work environment:
– Jokes
– Suggestive remarks
– Physical interference (blocking one’s path)
– Pictures, cartoons
– Derogatory comments
– Physical contact

Intent is immaterial
– Commentor may think it is a compliment
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Sexual Harassment

One occurrence is generally not enough
for legal liability.
– Repeated conduct generally necessary
– But some comments may be so severe that
they can result in liability.


The “reasonable woman” standard rules.
Best policy is to avoid all comments,
email, WWW, etc., that might in any way
result in liability.
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Sexual Harassment

Physical contact can be sensitive issue
– Hugs can be misunderstood.

NSPE Professional Policy 151 on sexual
harassment:
– “It is the policy of NSPE to comply strictly
with all applicable federal, state, and local
laws, which strictly prohibit sexual
harassment, in the conduct of any NSPE
sponsored business or social activities.”
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Sexual Harassment

NSPE procedure for reporting sexual
harassment:
– Bring occurrence to the attention of either
the NSPE President or the Executive
Director for investigation, as necessary.
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Board Member Liability


Personal liability for Board members is
rare, but the exposure exists.
Board members may be held personally
liable for:
– Disclosure of confidential information.
– Antitrust violations
– Sexual harassment
– Etc.

In absence of bad faith or fraud, it is
difficult to find liability.
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Board Member Liability

NSPE Operating Policy 27:
– “NSPE shall defend any suits or claims
asserted against its officers, directors,
committee/task force/board members, and
staff, past or present, in connection with
their authorized activities on behalf of the
Society, and shall indemnify and hold
harmless individuals so involved.”

NSPE carries insurance to cover
defense and potential damages.
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Arthur E. Schwartz, CAE
Deputy Executive Director & General Counsel
National Society of Professional Engineers
1420 King Street
Alexandria, VA 22314-2794
(703) 684-2845 - Phone
(703) 519-3763 - Fax
aschwartz@nspe.org - E-mail
www.nspe.org - Web site